LONDON Duferco, the world's biggest steel trader, said it will not bid for a key steelmaking complex owned by Italy's Lucchini because it can not commit to maintaining full employment and keeping the blast furnace running.
Antonio Gozzi, chief executive of the Swiss-based company, said Duferco and Italian steelmaker Feralpi had withdrawn their interest in Lucchini's Piombino complex because their vision was too removed from that of local unions and politicians.
"We don't believe the Piombino blast furnace has a future," Gozzi told Reuters by telephone on Tuesday.
"We decided not to bid because ... there's no reason to present something that's not in line with the hopes of local(s). We presented only a non-binding offer for the mill in Leccho," he added.
Lucchini, Italy's second-largest steel producer, was placed under "special administration" late in 2012. Its wire rod mill in Lecco in the north of the country is a small operation compared with Piombino, which employs an estimated 4,000 people directly and indirectly.
Hopes that the majority of jobs at Piombino will be saved are diminishing. An industry source close to Lucchini said the only potential bidder that had an interest in maintaining the blast furnace was Tunisia's SMC.
However on meeting the group last month, Piero Nardi, the special administrator for Lucchini, maintained that SMC's request to be given 300 million euros in return for taking on Lucchini was "unacceptable".
"Nardi and Lucchini should wait until the final offers are presented and not pre-judge any bid," said Mirko Lami of Italian union CGIL FIOM.
He added that the Piombino furnace has enough material to keep running until mid-April, after which he expects it will shut down if no suitable bid emerges.
Producing steel profitably has become difficult in Europe, where demand is down some 27 percent since the 2008 financial crisis, overcapacity is severe and prices have recovered only slightly from last year's 3-1/2 year lows .HRC-NED=SI.
The problem is particularly acute for Italy, Europe's second-largest steel producer, where the government is intent on protecting jobs in pig iron, steel and related industries that account for about four percent of GDP.
Before Lucchini entered into special administration, its owner - Russian steel producer Severstal (CHMF.MM) - had tried for a few years to sell the group.
(Additional reporting by Clara Denina, editing by David Evans)